Google Debuts Cost-Per-Click Self-Service Advertising

Search engine Google Inc. is confronting rival Overture Services head-on with a new self-service advertising program called AdWords Select that features cost-per-click pricing.

Cost-per-click pricing has been a mainstay of Overture's business model from its early days when it was known as GoTo.com. Cost-per-click ranks ads based on how much the advertiser is willing to pay per click -- pricing can range from a penny per click to many dollars.

Google's version of the cost-per-click model differs from Overture's in that it ranks ads based not only on how much an advertiser pays, but also on popularity. Using AdWords Select, advertisers pay when a visitor clicks on their ad. Google's previous program, AdWords, was based on a traditional system that required payment by the number of impressions delivered. As with AdWords, AdWords Select orders ads in a separate column on the right side of a search page.

"Unlike cost-per-click services, the top position is not automatically granted to the advertiser willing to pay the highest CPC," said David Krane, a Google spokesman. "AdWords Select ranking is determined by a combination of the ad performance (click-through rate) and how much an advertiser agrees to pay per click. This ranking method ensures that users see the most relevant ads first."

Also unlike its rival, advertisers' ads appear online immediately using the Google AdWords Select service. Using Overture's services, advertisers have to wait hours or even days while someone checks their ad for suitability.

However, analysts said Google's new service likely will not amount to much of a threat to Overture. In a statement, U.S. Bancorp Piper Jaffray Internet analyst Safa Rashtchy noted that Overture has deals with most of the major Web portals, including AOL Time Warner's America Online service, Microsoft's MSN and Yahoo.

He also said that Overture enjoys a big lead in the market, with 54,000 advertising partners. Google, he said, has about 1,000 partners.

Google said AdWords Select will not affect its premium ads sponsorship service, which enables advertisers to buy results targeted to keywords. The company charges $25 to $80 per thousand for premium sponsorships, which appear above the results on a search page.